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The story of WPP’s future might resemble Sherlock Holmes’ “curious case of the dog in the night time”—a dog that didn’t bark when expected to. In this scenario, the “dog” is WPP founder Sir Martin Sorrell, who would typically be vocal in criticizing his successor, Mark Read, as Read struggles to revive the sprawling empire he took over six years ago. But Sorrell, preoccupied with his own S4 Capital’s troubles—whose stock price has plummeted over 90% from an unrealistic peak—has remained silent.
Meanwhile, WPP’s stock has dropped by 16% over the past year, a far cry from its former valuation of $30.5 billion, now standing at around $10.2 billion. In comparison, French rival Publicis is valued at $25.4 billion, with Omnicom at $17.1 billion. The landscape in the advertising world seems to have shifted dramatically.
At a recent Capital Markets day, Read outlined a strategy focusing on AI and cost-cutting by streamlining WPP into six main brands: AKQA, Ogilvy, VML, Hogarth, GroupM, and Burson. WPP’s 40% stake in data company Kantar is also up for sale. While this may appear to be prudent management, it doesn’t quite amount to a robust growth strategy. The question remains: where is the growth going to come from?
AI isn’t unique to WPP; Publicis already claims to be integrating it into its operations. If AI is set to revolutionize the advertising industry, it might be through the likes of Microsoft or large consultancy firms like Accenture Song, making WPP’s $384 million investment in AI seem relatively modest.
Focusing on fewer brands might simplify WPP’s offerings for clients, but the real test is whether these brands can deliver. GroupM has lost significant accounts, and VML remains unproven. Ogilvy appears strong but could be sold if WPP needs to streamline further without dismantling the entire organization. Given WPP’s conservative outlook for 2024, it’s difficult to see what could significantly boost its share price, except perhaps a larger-than-expected sale of the Kantar stake, which might enable a transformative acquisition.
If Sorrell were to give advice, he might start by pointing out that he wouldn’t have let things get to this point. His strategy for WPP was always to be the biggest, banking on the world’s largest advertisers wanting to be part of the largest advertising network. Momentum in advertising is crucial, and holding companies like WPP can’t afford to lose it.
Read’s options appear limited: hope that clients, particularly those in tech, increase their spending and that the new, streamlined agency structure performs. Otherwise, WPP might attract the interest of a private equity firm, potentially leading to the company going private and re-listing in the U.S. Or, a smaller competitor might attempt a reverse takeover.
The upcoming year promises to be pivotal for WPP and Mark Read. The “barbarians” may already be at the gates, even if, for now, they remain quiet.